Government Policy and the Productivity Predicament

The poor performance of the American economy since 1970 has given rise to numerous proposals to increase the role of government in supporting the commercialization of new technologies through government demonstration programs and other policies designed to promote a specific new technical idea. This paper examines the political incentives acting upon government in supporting new technology, using several specific cases to illustrate the general principle that targeted demonstration projects are more likely to be the cause of declining productivity of American Industry than to be the cure.